Kathmandu. The ‘Capital Market Strengthening and Revival Action Plan, 2083’ unveiled by the Ministry of Finance on Monday has brought a policy to boost the morale of the overall capital market sector.

It is believed that the action plan brought by the Ministry of Finance will strengthen the private sector by making the overall capital market dynamic. Priya Raj Regmi, chairman of the capital market committee of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), has expressed the belief that if the capital market consolidation and revival action plan brought by the Ministry of Finance is implemented in letter and spirit, it will have a positive impact on the market.

“The action plan unveiled by the Ministry of Finance on Monday is very revolutionary and progressive in the capital market,” said Regmi, adding, “The Ministry of Finance has also revised the tax rates levied on capital gains tax, short-term and long-term transactions. The action plan has also proposed to improve the existing tax system to encourage long-term investment in the securities market.”

It has been proposed to increase the amount of gains received from listed entities to 3.75 percent and 5 percent on the gains received from those owned for more than 365 days or less.

Earlier, in the budget of the current financial year, the capital gains tax was fixed at 10 percent in the short term and 7.5 percent in the long term. Due to which the investors are scared, he said.

Chairman Regmi said that the action plan of the Ministry of Finance has been brought to encourage institutional investors. “Due to this policy, the entry of institutional investors into the capital market will definitely help to control unnecessary fluctuations in the market,” he said, “This policy has been brought in such a way that it will encourage all the three types of investors, small, medium and institutional.” ”

Former president of Nepal Investors’ Forum, Chhote Lal Rauniyar, said that the action plan unveiled on Monday will have a positive impact on the overall situation as it addresses many issues in the capital market sector. “The government has shown leniency by reducing the capital gains tax on a higher percentage of shares than what we had demanded,” he said, adding, “This action plan has also sent a message that the government is definitely trying to reform the capital market.” He said that the rule that allows the capital market to adjust even if it has incurred losses will definitely give a positive flow to the capital market.

According to the action plan, the banks and financial institutions will have to formulate an investment policy to reduce the ‘speculative risk’ on the investment made in the secondary market of securities. According to the action plan, the Board of Directors of the banks and financial institutions of Nepal Rastra Bank will have to make arrangements at the earliest to determine the investment policy so that the periodic limit of such investment is at least 45 days.

Former President Rauniyar said that this provision has also sent a positive message to the banks and financial institutions to buy and sell shares without any hindrance. Earlier, the limit period of investment of banks and financial institutions was six months. Former President Rauniyar said that the policy of allowing non-resident Nepalis to enter the secondary market is also to make the market dynamic and send a positive message to the economy.

The action plan incorporates reforms in primary and secondary markets, development of new financial instruments, expansion of institutional investment, development of bond market, restructuring of NEPSE, entry of NRNs in the secondary market, reform of tax system and review of capital market investment of banks and financial institutions.

Similarly, a policy has been put forward to make mutual funds a professional, diversified, transparent, risk-aware, technology-friendly and long-term investment pillar to develop instruments such as bond market, money market and exchange traded funds (ETFs). For this, the board will immediately publish the policy and prepare the necessary guidelines and infrastructure by mid-November.

Not only this, the action plan has given priority to the institutional reform and strengthening of the securities broker business. The Board has set a target to transform the broker business into an institution providing modern, professional, robust, technology-friendly and multi-dimensional securities financial services in accordance with international practices and standards.

The action plan also includes the drafting of separate bills related to regulatory and market infrastructure to make timely reforms in the Securities Act, 2063. It will lay the legal basis for the operation of instruments such as margin lending, inter-day trading, securities lending and borrowing and short selling.

Himal Lamsal/RSS